By John Lee.
Banking giant HSBC is reportedly struggling to exit its Iraqi operations, having had two proposals to sell its stake in Dar Es Salaam Investment Bank (DES) rejected by the country's regulator.
We reported in June that HSBC was exploring options to dispose of its 70.1 percent holding in the Iraqi bank following a strategic review.
According to Reuters, DES, which focuses on corporate and consumer banking and has eight branches in Iraq, has been linked to HSBC since October 2005. Its shares last traded at 1.36 dinars, down 63 percent from this year's high, which was hit in January, and far below levels around 6.00 dinars in 2011. The current market price values HSBC's stake at about 100 billion dinars ($86 million).
The company's chairman, Asad al-Kudhairi, said the Iraq Securities Commission (ISC) objected to HSBC selling at a value significantly below the market price. The regulator said that HSBC's previous proposals to sell were not approved by the ISC because they breached Iraqi financial regulations.
ISC chairman, Abdul Razzak al-Saadi, told Reuters:
"HSBC first proposed abandoning its stake in DES to Iraqi investors. We asked them the reason for abandoning its stake and the mechanism for transferring the stake, but they never returned with answers."
One of HSBC's proposals was for it to sell its DES shares at a nominal price of one Iraqi fils (a thousandth of a dinar) each, but HSBC officials did not explain why the bank wanted to do this, the regulator added. He did not elaborate on the ISC's objections to HSBC's proposals.
The central bank has agreed to extend the deadline for Dar Es Salaam to increase its capital until it sorts out this issue with HSBC.
Zawya reported that DES had a net profit of 12.06 billion dinars on revenue of 33.64 billion dinars in 2011, the latest period for which data is available.